WA gold miner Northern Star and Bill Beament, the dirt digger whose gamble is now worth $1.1 billion

It has been a turbulent period in the history of WA’s gold sector, but for one Perth producer the past year was a golden opportunity.

Diggers and Dealers at Kalgoorlie. Bill Beament M.D. of Northern Star Resources Ltd.

KALGOORLIE was born in the gold rush of the 1890s, when prospectors descended on the Goldfields in the hope of striking pay dirt.

Today, 29 gold mines operate throughout WA and, as the second largest employer in the resources sector, the industry provides more than 25,000 jobs statewide.

Volatile gold prices mean the sector has endured a period of turbulence and uncertainty, with cost-cutting the focus of many companies hoping to please investors.

But for Northern Star Resources, based out of an office in suburban Stirling, it was a golden opportunity.

At the Diggers and Dealers Mining Forum in Kalgoorlie earlier this month, Northern Star – and its managing director Bill Beament – was the star of the show.

In 12 months, Northern Star had gone from one operational mine, Paulsens, 180km west of Paraburdoo, to a five-mine company after a series of acquisitions.

In that time its workforce has swelled from 200 to 1050 employees and almost 600 contractors, while its market capitalisation has soared from $300 million to $1.1 billion.

The precious metal has a different allure to different people, be it as jewellery or an investment safe-haven, but the attraction for Mr Beament is in getting it out of the ground.

“I just love mining. To me it’s not really a commodity, it’s either in your blood or not. I just loved it from day one,” Mr Beament, a mining engineer by trade, said.

“I love being out in the bush, getting your hands dirty. Things change on a daily basis. You dig stuff up, you blow stuff up, you process and you get a final product at the end.

“I’ve just thoroughly enjoyed mining so it doesn’t really matter what commodity. Of course I like gold because, at the end of the day, I treat gold as a currency.”

Mr Beament told The Sunday Times this week that Northern Star’s rapid growth was a “very well executed plan” years in the making.

Having carried out its cost-cutting two years ago, Northern Star was well-placed when a gold price drop prompted companies to consolidate their mines.

“Gold price dropped March last year, $200 an ounce over two days, and that was the real the catalyst because we had our strategy, we wanted to do it and then there was no competition,” he said.

The deals – each in the tens of millions of dollars – have been described as “bargains”, but Mr Beatment said his company “paid fair value in the eyes of the beholder”.

Last December, Northern Star acquired the Plutonic mine, 180km northeast of Meekatharra, from Canadian-based Barrick Gold, the world’s biggest gold company, for $25 million.

This was followed a month later with the purchase of Barrick’s stake in Kundana and Kanowna Belle, both near Kalgoorlie, for $75 million.

And in May it bought the Jundee mine, 45km northeast of Wiluna, from US giant Newmont Mining Corporation, for $82.5 million.

With forecast gold production of 600,000 ounces, Northern Star is now Australia’s second largest gold producer and last month broke through the $1 billion market capitalisation barrier.

“It’s been a rapid rise, but it’s always swings and roundabouts, it’s like a yoyo. I gave a presentation to all these young university students in the mining industry and I gave the history of Northern Star from when it started. I used share price graph as a tool and one thing you’ll learn is it’s a yoyo,” Mr Beament said.

“I don’t worry about the share price. You’ve got to keep your eye on it for sure, but at the end of the day our core focus is that if you deliver operationally, everything else looks after itself. “We’re a mining company, we’ve got to produce at the lowest cost and make the most profit per ounce that we can. If you do that everything else will look after itself.

“I get more kicks out of our daily reports coming in and seeing how many metres we’ve developed, how many tonnes we’ve broken, how much gold we’ve poured and all that sort of stuff. That to me is more enjoyable than looking at share price.”

The Kundana mine includes the Pegasus deposit, which the company has described as one of the best high-grade gold discoveries in Australia of the past decade.

It is just 15km from Kalgoorlie and shows that some 120 years after the first strike on the Golden Mile, there is still plenty of the yellow stuff to be found.

Prospectors still head for the Goldfields in the hope of finding their fortune and while Mr Beament believes WA is the “best endowed state in the world”, everything on the surface has been found.

“It’s all at depth and that’s when it comes into geophysics, that’s the future of hard-rock industry, deposits at depth. It’s about using that technology from oil and gas into the hard rock sector, that’s the future and there is some really exciting stuff being developed,” he said,

That was one of his key messages to the State Government when he met the full cabinet last week along with other WA gold company bosses.

It was the latest move in the industry’s campaign to convince the Barnett Government to not increase the gold royalty.

Mr Beament said the sector was already “doing it really hard”, paid its “fare share” of royalties and described to the politicians how the future was heading underground.

“I said that in 10 years, there would be one substantial open pit gold mine operating in WA and that’s (Newmont Mining’s) Boddington,” he said.

“We have to transition those mines underground in the next 10 years and the way that (royalty) formula is calculated totally disadvantages undergrounds. I think that message resonated – don’t think we’ve got a great industry because the big open pits are gone.”

One of the images from the Heart of Gold campaign by the Gold Royalties Response Group.

ROYALTY THREAT TO EXPLORATION

GOLD miners are campaigning to win public support to stop an increase in the state’s royalty rates.

The Heart of Gold campaign, funded by the Gold Royalties Response Group, a group of 10 WA gold miners, highlights the contribution made by the 25,000 people employed in the sector.

The industry has warned of job cuts, less exploration or even mine closures if the royalty paid on the sales value of gold doubles to 5 per cent.

The group, which last week presented its case to Cabinet, said the sector pays more than $2.8 billion a year in wages and contributes $300 million in taxes and royalties.

Allan Kelly, managing director of Doray Minerals, which operates a gold mine 40km from Meekatharra, said with mines getting deeper and grades lower, the operating cost in WA was now among the highest in the world.

Mr Kelly said uncertainty about a future royalty hike was more damaging than whatever the Government decides.

“We (Doray) pay about $3 million in gold royalties and if we had to pay another $3 million in royalties it would have to come from somewhere,” he said.

“The easiest place for it to come from is exploration, so that’s $3 million we wouldn’t spend on extending our current operation or looking for new ones.”

Originally published as WA gold miner Northern Star and Bill Beament, the dirt digger whose gamble is now worth $1.1 billion